Understanding Vendor Email Compromise
Vendor Email Compromise (VEC) is a targeted cyberattack where criminals access the email systems of trusted vendors or suppliers to exploit their business relationships with other companies. This type of attack is particularly insidious because it leverages the trust and established communication channels between businesses, making fraudulent activities harder to detect.
Here’s a quick rundown of how vendor email compromise works:
- Initial compromise. Cybercriminals begin by compromising a vendor’s email account. This can be achieved through phishing attacks, malware, or exploiting weak passwords. Once they gain access, they monitor the email traffic to understand the vendor’s communication patterns and business processes.
- Surveillance and information gathering. After gaining access, attackers monitor the email exchanges between the vendor and their clients. They look for ongoing transactions, upcoming payments, and key personnel involved in financial decisions. This phase can last weeks or even months as the attackers gather detailed information to make their fraudulent communications more convincing.
- Manipulating communications. Once they have enough information, the attackers begin manipulating email threads. They might create fake invoices, change payment instructions, or insert themselves into ongoing conversations. These emails appear legitimate because they come from the vendor’s real email account, making it difficult for the targeted business to recognize the fraud.
- Executing the scam. The attackers typically focus on redirecting payments. They send fraudulent emails with altered bank account details, instructing the target to transfer funds to an account controlled by the criminals. Because the email appears to come from a trusted vendor, the victim often complies without suspicion.
- Covering their tracks. After the funds are transferred, the attackers might delete the fraudulent emails from the sent folder and trash, and set up forwarding rules to monitor future communications. This helps them stay ahead and cover their tracks, making it difficult for the vendor to realize their email account has been compromised.
Let’s illustrate it with an example. Suppose a mid-sized manufacturing company regularly orders supplies from a trusted vendor. One day, the company’s accounts payable department receives an email from the vendor with updated bank details for the next payment. The email looks legitimate because it comes from the vendor’s official account.
However, what the company doesn’t know is that cybercriminals have compromised the vendor’s email, intercepted the genuine invoice, and altered the bank account information. The company proceeds with the payment and transfers a large sum to the fraudulent account. When the fraud is discovered, the funds are long gone, and the company faces significant financial loss.
Vendor email compromise is a growing threat that requires businesses to be vigilant and take proactive measures. Understanding how VEC works is the first step in safeguarding your company against such sophisticated cyberattacks, but there are more measures you can take to stay safe.
How Can Businesses Protect Against Vendor Email Compromise (VEC)?
To safeguard against vendor email compromise, businesses must adopt a multi-layered approach that includes technology, employee training, and robust communication protocols. Here are key strategies to protect your organization:
Implement Strong Email Security Measures
- Multi-Factor Authentication (MFA). Ensure that all email accounts, especially those handling financial transactions, are secured with MFA. This adds an extra layer of security by requiring users to provide two or more verification factors to gain access.
- Advanced email filtering. Deploy advanced email filtering solutions that can detect and block phishing attempts and malware. These tools can analyze email content and attachments for suspicious activity and prevent malicious emails from reaching your inbox.
- Encryption. Use email encryption to protect sensitive information from being intercepted by unauthorized parties. Encryption ensures that even if emails are intercepted, their contents remain unreadable to attackers.
Conduct Regular Employee Training
- Awareness programs. Regularly educate employees about the latest cyber threats, including VEC. Training should cover how to recognize phishing emails, the importance of verifying requests for financial transactions, and the procedures for reporting suspicious activities.
- Simulated phishing exercises. Conduct simulated phishing attacks to test employees’ ability to identify and respond to phishing attempts. This helps reinforce training and highlights areas where additional education may be needed.
- Security best practices. Ensure employees follow best practices, such as not clicking on links or opening attachments from unknown sources, using strong, unique passwords, and regularly updating their passwords.
Verify Payment Requests and Changes
- Verification protocols. Establish a verification process for any requests to change payment details or make large transfers. This could involve a phone call or face-to-face confirmation with a known contact at the vendor’s organization.
- Segregation of duties. Implement segregation of duties within your finance team to ensure that no single person is responsible for both requesting and approving payment changes. This reduces the risk of fraud going undetected.
- Regular audits. Conduct regular audits of financial transactions to detect any anomalies or unauthorized changes. Audits can help identify potential fraud early and mitigate its impact.
Strengthen Vendor Communication Protocols
- Secure communication channels. Encourage vendors to use secure communication channels for sending sensitive information, such as encrypted email or secure file-sharing platforms.
- Regular vendor check-ins. Maintain regular communication with your vendors and verify their contact information periodically. This ensures that any sudden changes in contact details are legitimate and not the result of a compromised account.
- Vendor security policies. Work with your vendors to ensure they have strong security policies in place. This includes securing their email accounts, regularly updating their systems, and conducting their own employee training on cybersecurity.
Use Technology Solutions
- Threat intelligence. Leverage threat intelligence services that provide real-time updates on emerging cyber threats. These services can help your organization avoid potential attacks by identifying new tactics used by cybercriminals.
- Fraud detection software. Deploy fraud detection software that uses machine learning to identify unusual patterns in financial transactions. This software can flag suspicious activity for further investigation, helping to prevent fraudulent transactions.
- Incident response plan. Develop and regularly update an incident response plan that outlines the steps to take during a VEC attack. This plan should include procedures for containing the breach, notifying affected parties, and recovering compromised systems.
A proactive approach that combines technology, employee education, and robust verification processes is essential for protecting your organization against VEC attacks and maintaining trust with your vendors and customers.
Summary
- Vendor email compromise (VEC) is a cyberattack where criminals infiltrate a vendor’s email account to exploit the trust between businesses and their vendors. The attackers use this access to manipulate communications, redirect payments, and steal funds.
- In a VEC attack, attackers gain access to a vendor’s email, monitor communications to gather information, and then manipulate emails to redirect payments to fraudulent accounts.
- To defend against VEC, businesses should implement strong email security protocols, conduct regular employee training, verify payment requests, strengthen vendor communication practices, and use advanced technology solutions for fraud detection and response.